Goodwill

RECENT NEWS
The Australian  Aug 10  Comment 
WorleyParsons has flagged a goodwill impairment of roughly $200m as the company grapples with a downturn in the resources sector.
The Australian  Aug 4  Comment 
Helloworld has narrowed its full-year guidance but will see its accounts in red after booking a charge of $205m.
The Hindu Business Line  Jun 19  Comment 
High-profile professionals are chucking fancy jobs to start social enterprises and high-networth investors are bullish on businesses producing goods and services for low-income groups. India is rapidly emerging as the nucleus of impact investments
The Economic Times  Jun 5  Comment 
One should see what the stand the Centre is going to take on the controversy surrounding Nestle's brand Maggi, says Joshi.
The Straits Times  May 27  Comment 
May 28, 2015 1:58 AM AN IMPAIRMENT for its struggling Chinese operations hammered the bottom line at medical device manufacturer Biosensors International.
The Hindu Business Line  May 24  Comment 
Describing social media as a powerful tool to reach out to the masses, Maharashtra Chief Minister Devendra Fadnavis on Sunday asked BJP workers to use technology wisely to enhance the goodwill of...
newratings.com  Apr 30  Comment 
WASHINGTON (dpa-AFX) - Christiane Amanpour, a renowned journalist and CNN's chief international correspondent, has been named the UNESCO Goodwill Ambassador for freedom of expression and journalist safety. Amanpour received the honor during...
TechCrunch  Apr 28  Comment 
 Caveat Ballmer, or something. Microsoft made waves recently by disclosing in its quarterly 10-Q document that its Phone business, which generates billions in yearly revenue, isn’t performing as well as it expected. As Microsoft is carrying...




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Goodwill is the premium paid by an acquiring company over and above the acquired company's tangible book value. On a company's balance sheet, goodwill represents the sum of all the premiums the company has paid for all of its acquisitions (although occasionally goodwill from past acquisitions whose value has fallen is written down).

Because tangible book value is equivalent to the replacement cost of a company - IE, what it would cost to buy all the company's properties, buildings, factories, and machines, hire all its workers, etc. - you might think an acquiring company would never pay more than tangible book value. After all, the acquiring company could simply build the acquisition target company from scratch for the price of its tangible book value.

However, most companies have intangible assets - such as relationships with key customers, patents and trademarks, the unique character of its employees, which are not so easily replaced. So, acquiring companies frequently pay more for a company than its tangible book value.

The acquiring company must carry the premium it pays for its acquisition targets above tangible book value as "goodwill".

Goodwill is an intangible asset arising from an acquisition, but not all intangible assets are goodwill - only those a company owns as a result of purchasing other companies. It should be noted that because Goodwill is technically an intangible asset, companies will occasionally lump the two together on the balance sheet, typically as "Goodwill and Intangibles".

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